Alcatel-Lucent's future is at risk: CEO

Lucy Battersby

The global head of telecom equipment maker Alcatel-Lucent has warned the company could "disappear" if it is not allowed to proceed with a global cost-cutting program, as fears of job cuts sparked protests in Paris this week.

Global chief executive Michel Combes, told Europe 1 radio the company's future was at risk if it could not execute the turn-around strategy announced in June.

"Yes, this company can disappear. This company has not earned any money since 2006 and the merger of Alcatel and Lucent. This company has lost between 800 million and 1 billion euros per year", Mr Combes said.

"The company and its workers are going through a painful period. I understand the difficulties for our collaborators. I have two responsibilities: save the company - do everything I can to avoid it disappearing. And do everything possible to allow each (worker) to find a job internally or externally."

Meanwhile, Alcatel-Lucent's Australian business has already cut about five per cent of its 700 to 800 person workforce in recent years and embarked on further cost-cutting measures.

It has also been marketing itself as the industry leader in copper vectoring and broadband technology ahead of a potential switch to a fibre-to-the-node national broadband network (NBN) by the new Coalition government.

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In 2010 Alcatel-Lucent won a contract potentially worth $1.5 billion with NBN Co to supply transmission and aggregation equipment for the fibre-optic network. The initial 2010 order was for $70 million worth of equipment with further purchases as the NBN rolled out.

Mr Coombes made the explosive comments ahead of a French parliamentary hearing about Alcatel-Lucent's so called 'Shift Plan' and ahead of meetings with unions about the redundancy program.

The Franco-American group previously unveiled plans to slash 10,000 jobs worldwide by the end of 2015 from a workforce of 80,000, including 900 in France. It argues the cuts were its last chance to stem years of losses and turn the company around. This includes 3800 jobs from the Asia-Pacific region, 4100 from Europe, Africa and the Middle East, and 2100 from the Americas. It would also halve its business hubs around the world, .

During a two-hour parliamentary hearing, Mr Combes told French lawmakers his plan differed from six previous attempts to overhaul Alcatel since it merged with Lucent in 2006, and he pledged to find new jobs for all 900 workers facing layoffs in France.

"I don't plan on there being a 7th" restructuring plan, he told parliament's economic affairs committee.

"I'm convinced that we have a plan that is coherent, that is complete, that addresses all the problems the company is facing and can get it back on its feet."

More than 1500 Alcatel-Lucent workers marched in Paris on Tuesday to protest against the plan, which involves closing the Orvault facility in northern France that Alcatel management in January promised to maintain.

The Shift Plan was first unveiled by Mr Combes in June after he was appointed chief executive in April. The plan aims to "reposition Alcatel-Lucent from a telecommunications equipment generalist to an industrial specialist in IP Networking and Ultra-Broadband Access (mobile and fixed) at the heart of next-generation networks".

It also wants to cut operating costs to increase operating margins from 2.4 per cent in 2012 to 12.5 per cent by 2015, and recently went to the debt markets to borrow €630 million to extend maturity dates and take advantage of cheaper financing rates. Backed by a sympathetic Socialist government which has pressed Alcatel-Lucent to limit job cuts, French Democratic Confederation of Labour [CFDT] leader Herve Lassale said workers would try to extract concessions from Mr Combes in talks starting this month.

Meanwhile, the French government, battling against years of de-industrialisation and high unemployment, has warned it could use new labor rules to block the plan.

Mr Combes told lawmakers the firm had little choice but to cut operating costs and consolidate resources around fewer sites as after losing €700-800 million ($US1.08 billion) per year since its merger with US firm Lucent Technologies.

Under labor reforms that became law in May, firms must agree on terms of their restructuring with unions before submitting them to the Labour Ministry for approval. Previously, they only had to consult with a works council.

Mr Combes, who was previously chief executive of Vodafone Europe from 2008 to 2012, said he had already put aside a plan by predecessor Ben Verwaayen that aimed to end completely the group's activities in France.

"If I decided to come back to France to try to get this company back in shape, it's because I believe in it," he said.